The Governor of the Reserve Bank of Australia (RBA), Philip Lowehas spoken about the economic outlook and monetary policy at the Anika Foundation fundraiser in Sydney.
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Further rate hikes will be necessary, but not on a pre-set path.
He is aware of the delays in the operation of monetary policy and that rates have risen very rapidly.
The case for a slower pace of rate hikes grows stronger as the level of the cash rate rises.
But the level of the rates and how quickly they occur will depend on the data, the inflation outlook and the labor market.
Price stability is necessary for a strong economy and sustained full employment.
A sharp global slowdown would make a soft landing in Australia difficult.
Recent data continues to suggest the resilience of australian consumer spending.
Inflation expectations remain consistent with the inflation target.
A change in inflation expectations will require a rise in interest rates.
In our national interest, we prevent this change.
Aggregate wage growth has not yet responded significantly to rising inflation.
Flexible inflation targeting has been well used in Australia and remains the best monetary policy regime.
I don’t see a strong argument for moving away from this general approach.
It is worth examining the arguments for and against a change in the 2-3% target range.
It is important that we learn from our forecasting errors about inflation.
Source: Fx Street
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